Environmental and ratepayer advocates are withholding their full-throated support for Consumers Energy’s new long-term energy plan that eliminates coal usage by 2025, citing concerns over potential rate effects and the scale of ongoing fossil fuel reliance.
On June 23, the Jackson-based investor-owned utility announced a historic 20-year plan that most notably would retire some of its remaining coal-burning units 15 years ahead of its previous target. Shutting down the remaining coal units, including three at the J.H. Campbell plant in Port Sheldon, and increasing renewable energy and energy efficiency spending sets a more aggressive emissions-reduction timeline than goals proposed by Gov. Gretchen Whitmer and President Joe Biden.
In a press conference announcing the plan, utility officials touted the environmental benefits and $650 million in anticipated cost savings by 2040 to attract widespread support.
However, the reviews from advocates in the energy sector have been mixed.
“It’s complicated,” said Margrethe Kearney, a Grand Rapids-based staff attorney for the Environmental Law and Policy Center who regularly intervenes in contested cases before the Michigan Public Service Commission. “It’s impossible not to cheer for the fact that it’s going to shut down all of their coal units by 2025 — that’s earlier than I think most people anticipated.”
Kearney added that the “real concern” comes from Consumers’ proposal to buy four existing natural gas plants totaling more than $1.34 billion, including three that are currently owned by subsidiaries of CMS Energy Corp., Consumers’ parent company.
While Consumers has earned praise for not proposing to build new large-scale gas plants like Detroit-based DTE Energy, “what worries me is the amount they’re purchasing and where they’re purchasing it from,” Kearney said, questioning how the utility evaluated other options. “There’s concern from the environmental and (ratepayer) side that they’re going to run them a whole lot more than they need if they own them.”
Consumers Energy is proposing to buy the Covert Generating Station in Van Buren County for $815 million, which would ensure reliability while intermittent resources like wind and solar aren’t producing power. Kearney noted that the three additional “peaker plants” currently owned by CMS affiliates are meant to run during periods of high demand. Consumers also is proposing to offset its lost coal generation almost entirely with the natural gas units.
“We don’t want to see Consumers taking coal offline to replace it with natural gas,” Kearney said. “I could see them taking all of their coal offline and replacing 30 percent of it with short-term gas.”
Officials at Consumers maintain that the proposed gas plant purchases are necessary to ensure grid reliability, and they have cited the February cold weather snap that strained the Texas power grid. The company’s formal filing with the MPSC on June 30 also notes that the proposed plant purchases were based on a competitive bidding process to comply with state and federal requirements.
“These natural gas plants — along with Consumers Energy’s current natural gas-fired power plants in Zeeland and Jackson — would supply reliable, on-demand electricity to meet Michigan’s energy needs when renewables and other sources are not available,” Consumers Spokesperson Katelyn Carey said in an email. The company also says it got an “excellent deal” on the gas plants, and would pay half the cost per kilowatt-hour as new solar or storage.
In a presentation to investors, Consumers notes that the plan would add more than $1 billion to the company’s rate base — or what it can collect from customers plus a rate of return — over the next five years while producing a “premium total shareholder return.”
The MPSC will spend the next year evaluating Consumers’ proposal to determine whether it’s the most “reasonable and prudent” way to meet the company’s energy needs, a central legal requirement in utility proceedings.
Officials with trade groups representing advanced energy companies and large energy users also welcomed the early coal retirements but are waiting on additional details for Consumers’ spending plan, how it will contract with independent power producers going forward, and how the company will continue to collect coal plant-related costs from ratepayers.
“One of the concerns for us is that they are asking for approval to continue to collect the cost of these facilities that they plan to retire early of their own choosing, and … earn a rate of return, or profit, on generation assets that will no longer be used and useful,” said Rod Williamson, executive director of the Association of Businesses Advocating Tariff Equity (ABATE), which represents large energy users. “We see that as a significant concern and issue that needs to be discussed as part of this proposal.”
Laura Sherman, president of the Michigan Energy Innovation Business Council, noted that the “utility business model generally and historically favors the utility owning (generation assets). We think there is a lot of value to be derived in terms of cost effectiveness to customers, and value to third parties, by having the ability to use power purchase agreements and other ownership models,” she said, referring to solar contracts.
‘Quite a surprise’
Although Consumers’ plan is subject to regulatory approval, the company’s announcement has sent local transition planning into overdrive.
“It came as quite a surprise,” Port Sheldon Township Supervisor Howard Baumann told MiBiz, adding that township and utility officials met on the same day of the public announcement.
“They did say they would be involved with planning and moving forward in the township. Our Planning Commission will probably have to look at updating our master plan — probably sooner rather than later,” he said. “They didn’t have a lot of answers as far as what’s next for reclaiming the site.”
Baumann said the Campbell plant contributes about 30 percent to the township’s tax base, which helps fund parks and other local services. While that wouldn’t deteriorate immediately if the plant were to close in 2025, Baumann said local officials will start preparing for the gradually reduced tax base.
As well, state officials’ transition planning around the Campbell plant will speed up should the plant close in 2025. The Department of Treasury’s Energy Transition Impact Project (ETIP), created by executive order last year by Gov. Whitmer, is helping communities across the state transition from power plant closures.
“This particular one was a surprise to everyone,” said Larry Steckelberg, a Treasury division manager who helps oversee the ETIP program. “We expected (Campbell) to be functioning in some form through 2040. … Our role is to be as helpful as possible to bring state and federal resources to the table and invest in those (transition) efforts.”
In the late-June press conference, Consumers Senior Vice President of Governmental, Regulatory and Public Affairs Brandon Hofmeister said the company has a “playbook” it can work from after closing seven Michigan coal plants five years ago, including in Muskegon.
“We’ll help employees who want to have a role with the company to continue to do so, and we’ll help communities reimagine their local economic landscapes and explore redevelopment opportunities,” Hofmeister said.